Wells Fargo Fined $185 Million for Opening Millions of Fake Accounts
Yesterday, federal regulators fined Wells Fargo $185 million after investigations revealed that employees had opened millions of fake accounts under customer names. The bank fired nearly 5,300 employees for their involvement with these accounts.
The Consumer Financial Protection Bureau fined the bank an historic $100 million, and claims Wells Fargo employees “secretly opened accounts and shifted funds from consumers’ existing accounts into these new accounts without their knowledge or permission to do so, often racking up fees or other charges.”
Wells Fargo employees were compensated for getting existing customers to sign up for new deposit accounts, credit cards, debit cards and online banking. To take advantage of these perks and meet sales targets, the CFPB said Wells Fargo employees illegally enrolled customers in additional services without the customer’s knowledge or consent.
According to the CFPB, employees funded these accounts by transferring money from a consumer’s existing account, which would sometimes result in the customer being fined insufficient fund fees. Customers would also be charged annual fees, late fees and associated finance or interest charges for credit card accounts that were opened without their knowledge.
The CFPB said Wells Fargo employees have been doing this for at least the past five years.
As restitution, the Consumer Financial Protection Bureau is requiring Wells Fargo to:
- Pay full refunds to customers
- Ensure proper sales practices in the future
- Pay a $100 million fine
This action is the largest penalty the CFPB has every imposed. CFPB Director Richard Cordray said, “Because of the severity of these violations, Wells Fargo is paying the largest penalty the CFPB has ever imposed. Today’s action should serve notice to the entire industry that financial incentive programs, if not monitored carefully, carry serious risks that can have serious legal consequences.”
Wells Fargo must also pay $35 million to the Office of the Comptroller of the Currency and another $50 million to the City and County of Los Angeles.
About Bill Hardekopf
Bill Hardekopf is the CEO of LowCards.com and covers the credit card industry from all perspectives. Bill has been involved with personal finance for over 15 years. He is a frequent contributor to Forbes, The Street and The Christian Science Monitor.